IRS lets a taxpayer reelect the § 911 foreign earned income exclusion early after a change of employers

Plain-English summary

A U.S. citizen living and working abroad had used the section 911 foreign earned income exclusion, which lets qualifying Americans overseas leave a chunk of their foreign wages off their U.S. tax return. For one year he switched approaches and claimed a foreign tax credit instead, which counts as revoking the exclusion. Under section 911(e)(2), once you revoke the exclusion you normally cannot elect it again for five more years unless the IRS gives permission. He asked to reelect it early, one year after revoking, because he had changed employers. The IRS granted permission. The governing regulation (Treas. Reg. § 1.911-7(b)(2)) says the IRS can allow an early reelection after weighing the facts, and it specifically lists a change of employer as a relevant factor. The taxpayer must make the reelection within 60 days of the ruling. The IRS expressed no view on whether he otherwise qualifies for the exclusion. It matters to Americans working abroad who revoked the exclusion (often to grab a foreign tax credit) and later want it back before the five-year waiting period runs.

Ruling snapshot

• Question: May the taxpayer reelect the § 911 foreign earned income exclusion within five years of revoking it?
• Outcome: approved (early reelection permitted; must reelect within 60 days)
• Key authorities: IRC § 911(a), (e)(2); Treas. Reg. § 1.911-7(b)(1), (b)(2); Rev. Rul. 90-77

Full text (IRS public release)

Internal Revenue Service                                  Department of the Treasury
                                                          Washington, DC 20224

Number: 202336002                                         [Third Party Communication:
Release Date: 9/8/2023                                    Date of Communication: Month DD, YYYY]
Index Number: 911.11-03
                                                          Person To Contact:
                                                          --------, ID No. ------
                                                          Telephone Number:
                                                          ------
                                                          Refer Reply To:
                                                          CC:INTL:B02
                                                          PLR-101779-23
                                                          Date:
                                                          May 30, 2023

               TY: -------

Legend

Taxpayer          = ----------
                     SSN: ------
                     ------
                     SSN: ------
Company A = ------
Company B = ------
Company C = ------
Country X         = ------
Year 1            = -------
Year 2            = -------
Year 3            = -------

Dear -------------------------:

        This is in response to a letter received by our office on January 26, 2023,
requesting permission to reelect the foreign earned income exclusion under section 911
of the Internal Revenue Code (the Code) for Year 3.

      The rulings contained in this letter are based upon information and
representations submitted by the taxpayer and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

FACTS

       Taxpayer is a U.S. citizen who has been living in Country X since Year 1. He
worked for Company A from Year 1 until Year 3. For Year 1, on his U.S. income tax
return, Taxpayer claimed the foreign earned income exclusion under section 911(a) of
the Code. For Year 2, Taxpayer decided to claim a credit for the taxes paid to Country X
rather than to elect the foreign earned income exclusion and housing cost amounts. In
Year 3, Taxpayer changed employers and commenced a job with Company B.

Ruling Requested

      Taxpayer requests permission to reelect the foreign earned income exclusion
pursuant to section 911 of the Code for Year 3 and subsequent taxable years.

LAW AND ANALYSIS

       Section 911 of the Code permits certain taxpayers to elect to exclude from gross
income their foreign earned income and housing cost amounts. The election applies to
the taxable year for which it is made and for all subsequent taxable years, unless
revoked by the taxpayer. Section 911(e)(2) provides that once revoked, the election
may not be made again by the taxpayer until the sixth taxable year after the year in
which the revocation was made.

        However, Treas. Reg. § 1.911-7(b)(2) provides that if an individual revokes the
election to exclude foreign earned income under Treas. Reg. § 1.911-7(b)(1), and
desires to reelect that same exclusion within the next five years, the individual must
obtain permission by requesting a ruling. The Service may permit the taxpayer to reelect
the foreign earned income exclusion before the sixth year after considering all of the
facts and circumstances. Treas. Reg. § 1.911-7(b)(2) provides that relevant facts and
circumstances may include a period of United States residence, a move from one
foreign country to another foreign country with differing tax rates, a substantial change
in the tax laws of the foreign country of residence or physical presence, and a change of
employer.

       Taxpayer effectively revoked the foreign earned income exclusion for Year 2 by
claiming the foreign tax credit. See Rev. Rul. 90-77, 1990-2 C.B. 183. Taxpayer is
seeking permission to reelect the exclusion for Year 3, which is within five years of Year
2, because he changed employers.

CONCLUSION

      Accordingly, based solely on the information submitted and representations
made, Taxpayer may reelect the section 911 foreign earned income exclusion for Year
3 and subsequent tax years within 60 days from the date of this ruling letter in
accordance with the rules set forth in section 911 and the regulations thereunder.

        Except as otherwise expressly provided herein, no opinion is expressed as to
whether Taxpayers otherwise satisfy the requirements of section 911 and thus, are
eligible to exclude foreign earned income and housing cost amounts from gross income.
In addition, no opinion is expressed or implied concerning the tax consequences of any
aspect of any transaction or item discussed or referenced in this letter.

        This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent. A copy of this letter must
be attached to any income tax return to which it is relevant. Alternatively, if Taxpayer
files his return electronically, he may satisfy this requirement by attaching to the return a
statement that provides the date and control number of the letter ruling.


                                       Sincerely,

                                       /s/ Kristine Crabtree

                                       Kristine A. Crabtree
                                       Senior Technical Reviewer, Branch 2
                                       (International)


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